by Structured Settlement Watchdog
Will Genex Capital's militant marketing of factored structured settlement payment streams as annuities on its Assured Annuity website survive its
recent legal and financial challenges?
By commencing litigation, Genex Capital faces legal and financial challenges that appear to be of its own doing, arising out of its Receivables Purchase Agreement, the alleged rights thereunder, actions it took and the ongoing litigation between Genex Capital and one set of investors, intermediaries and potentially, a whole new set of investors (who were sold by Genex and bought from Genex, rights to payments that are being contested by original investors. The litigation has also inveigled payment servicing companies.
In a previous post "Retread Carefully" JD Supra Article About Genex Capital Imbroglio with Investors and Intermediaries, I introduced a circle chart that might help new readers quickly understand what is happening in the Arizona lawsuits
Whether you see the claims as meritorious or meritless, the Arizona litigation and the actions of Genex Capital, should be important reading material for anyone considering buying factored structured settlement payment streams as an investment, for a stark example of what can go wrong.
Consider what Genex Capital states on its website in soliciting investors at the time of publishing.
- "PREMIUM ANNUITIES* AT PREMIUM RATES…
- ANNUITIES = CONTRACTS PROVIDING FOR THE PAYMENT OF A SUM OF MONEY PAYABLE YEARLY OR AT OTHER REGULAR INTERVALS
- Genex Capital states on the Assured Annuity website that "Each Assured Annuity™ is paid directly to you by a U.S. based Insurance Company with a credit rating that is generally AAA to A rated by Standard and Poor’s. In cases where you may want to resell the annuity in the future or in other appropriate circumstances, these payments may be paid through a third party bonded servicing company arranged by Genex Capital. In such case, you will have a direct relationship with such servicing company".
- "In fact, a fixed Assured Annuity is something that can be purchased on the previously owned annuity market"
- "These payments can be paid out by the insurance come (sic) be (sic) responsible for them directly or by a third party. The thing to keep in mind is that all the companies involved are very reliable and the insurance companies responsible for making those payments have anywhere from and A to a AAA rating from Standard & Poor’s. This means that people can put their money into these annuities with a great deal of trust and that they don’t have to worry that they’re making an investment in something that will not pay out".
Why does Genex Capital use the term annuity to describe structured settlement payment rights for sale, to imply what they clearly are not? For marketing purposes, because the term annuity is familiar to the people, but it's inaccurate and misleading. I suspect that Genex Capital will not be able to prove that they have actually purchased a structured settlement annuity by a litigant. Factored structured settlement payments streams is a mouthful, but it's accurate.
To their credit, competitors of Genex Capital have recognized this, why not Genex Capital?
Readers may wish to refer back to my August 3, 2020 post "Is the Use of the Term "Assured Annuity" in Genex Capital Assured Annuity™ Misleading?", a continuation of ongoing commentary on this important issue.
The tumbleweed of pending litigation in Arizona simply underscores for investors, particularly vulnerable retired persons, that factored structured settlement payments are not annuities and is a stark example of what can go wrong and what the stakes are. Insurance regulators, attorneys general throughout the United States and regulators of financial advisors should tune in to this subject matter and close the gap, in my opinion.
When you buy a legitimate regulated annuity product issued by an insurance company
- you complete an application with an agent or broker who licensed by the insurance department in your state and you, or your retirement plan owns it;
- part of the application process includes a suitability questionnaire, which includes suitability determination with checks and balances governed by state law;
- in addition to licensing, your agent or broker must complete (1) compulsory annuity training approved by the insurance department or department of financial services in your state, and (2) product specific training for each insurance company and the specific product sold;
- If you are the owner of the annuity and if you decide to surrender or sell the annuity, you can do so without court approval. There may be surrender charges if you want to surrender in the early years depending on the insurance company;
- You don't have to worry about XYZ insurance company coming after you if you decide to sell your payment rights to an investor without going through the insurance company;
- You have the ability to file a complaint with state insurance regulators instead of being in "no-man's land";
- No need to know about the Hague Service Convention which applies to Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters and is a multilateral treaty adopted in The Hague, The Netherlands, on 15 November 1965 by member states of the Hague Conference on Private International Law. It came into existence to give litigants a reliable and efficient means of serving the documents on parties living, operating or based in another country.